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Hynix Semiconductor is facing a cash crisis as losses deepened to over 1.4 trillion won in 2008, approximately US$972 million, in the first three quarters of the year. The company also face repayments on maturing loans in 2009 that have been estimated at over US$500 million. Hynix is estimated to currently have cashable assets of approximately US$1.2 billion. However, losses are expected to climb above 3Q08 figures of approximately US$300 million in both 4Q08 and 1Q09, significantly eroding its cash balance, which does not include capital expenditure requirements for 2009.

According to the Korean Times and Reuters, Hynix is seeking to raise fresh funds from investors and major Korean banks that hold the majority of Hynix shares after saving the company from bankruptcy in 2001. Then as now, the news reports are citing the Korean Government to be supporting Hynix in raising the cash to continue operations.

The Korean Government support via Korean banks mirrors the potential intervention of the Taiwan Government in facilitating further credit instruments for Taiwan’s struggling DRAM manufacturers.

In a long-running snipe at Taiwanese memory manufacturers, the Korean Times quoted Lee Dong-keun, a spokesman at the Korean Ministry of Knowledge Economy, as saying that Hynix was in a better financial position than all the Taiwan DRAM manufacturers as well as Qimonda AG, with many of the Taiwanese players not expected to survive the current downturn.

The Korean Government is therefore hoping that financial support for Hynix will see the world's second largest memory manufacturer weather the current storm while others are expected to fail, enabling Hynix to pick up market share and take advantage of a potential fall in supply that would see memory prices climb, aiding the return to profitability.

However, the Taiwan Government is unlikely to oversea a memory manufacturing collapse on home territory and reports suggest it could support banks lending to struggling producers.

Continued overcapacity and now falling demand has seen only Samsung return profits in the memory market during 2008. Now, financial analysts are projecting that Samsung could also produce operating losses in the coming quarters as the full effects of the economic recession are realized.

Although consolidation in the DRAM market has long been touted as a necessity to reduce overcapacity and fierce pricing pressures, little has actually happened on this front for the last two years. With governments in Korea and potentially Taiwan underpinning further cash injections into memory manufacturers, consolidation could be pushed out, exacerbating short to near-term recovery in the memory markets.